Levine on Wall Street: Secret Trusts and Bullet-Proof Vests

You may have heard. I have not read it yet, but BreakingViews did a team-reading stunt and here is their review. Here are some juicy bits about bank CEOs. Meanwhile, not having read it, I will continue to hope that it's just, like, 700 pages of making fun of Neil Barofsky, the former TARP inspector general whose "desire to prevent perfidy was untainted by financial knowledge or experience." According to Barofsky -- who also hasn't read it! -- there's quite a bit of that, and he's prepared a response:

First, Mr. Geithner suggests that it was improper for the federal law enforcement agents who worked at SIGTARP to carry weapons or have bullet-proof vests. This comment demonstrates Mr. Geithner’s ignorance with respect to law enforcement safety protocols and is frankly insulting to the dedicated law enforcement officers who work at SIGTARP. SIGTARP’s federal agents have all of the same law enforcement powers and responsibilities as the FBI, the Secret Service, and any other white-collar federal law enforcement officers. No one would suggest that an FBI agent would execute an arrest or search warrant in a potentially armed white collar defendant’s home without following standard safety protocols, and Mr. Geithner’s suggestion that SIGTARP agents should not have been afforded those same protections is uninformed and dangerous.

A jury found that two Texas billionaire brothers committed fraud by sort of hiding their ownership of a lot of stock via offshore trusts. One juror said of the Wylys' defense, "We couldn't see it, we couldn't find it," and that seems about right honestly. Their defense seems to have been "well the rules are complicated," which is never a great thing to tell a jury about your network of offshore trusts. The Wylys made about $30 million of insider trading profits, but they might be liable for as much as $550 million in damages in this case, mainly for pretty nitpicky disclosure failures that don't seem to have actually hurt anyone. So that seems a bit harsh.

The hearing started with one Labour MP calling Pfizer a “praying mantis” and a “shark that needs feeding" and asking if it is "a leopard that has changed its spots,” and that is just too many animal metaphors in one place. (Also are praying mantises, like, all that scary?) I gather that people are worried about job losses and loss of scientific research activity in the UK. Meanwhile across the pond Pfizer's tax-driven merger strategy is providing work for at least some people. Andrew Ross Sorkin has hilariously specific M&A pipeline information, noting that "Since Pfizer announced its offer, at least a half-dozen bankers have counted more than 17 incoming calls from Fortune 500 companies requesting an analysis of merger prospects that involve an inversion."

US Attorney General Eric Holder is still really into getting criminal guilty pleas from BNP Paribas and Credit Suisse, though he also talked to France's finance minister and "assured the minister the bank wouldn't be surprised by any of the department's moves in the case." If you're BNP Paribas it's got to be a little tempting to refuse to plead guilty and see if they indict you. Anyway this too-big-to-jail stuff is so stupid that Holder himself is obviously embarrassed about it:

"I am impatient," Mr. Holder said in an interview. "We're talking about conduct that contributed to the greatest financial disaster since the Great Depression. Not the sole cause, but contributed to it, so this is a priority, and that's why I'm dedicating so much time to it."

That "Not the sole cause" walk-back was required because BNP Paribas's violations of U.S. sanctions and Credit Suisse's tax dodging had not the tiniest molecule of a connection to the financial crisis, and Holder knows it, and everyone knows it, and Holder has to just sit there and say obviously false things because blah blah blah too-big-to-jail, feh.

Meanwhile in actual financial-crisis related stuff, you can still trade Lehman Brothers bankruptcy claims, which have made a lot of money for a lot of hedge funds, including over $1 billion for John Paulson. The losers seem to have been the big banks who were Lehman's counterparties and sold their claims early to hedge funds, so if you squint you can view these returns as the reward to these hedge funds for stabilizing the financial system in 2008.

I don't really get why anyone would worry about banks allocating well-priced bond deals to favored clients, but people do, and increasing jumbo bond deals will raise increasing questions about allocations. I guess this is a nice problem to have compared to "nobody is buying bonds" or "nobody is selling bonds" or "every deal we do goes terribly," but it does seem a bit rough that the big successful deals can also get you in trouble.

To contact the writer of this article: Matt Levine at mlevine51@bloomberg.net.

To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net.

Matt Levine is a Bloomberg View columnist writing about Wall Street and the financial world. He is a former investment banker, mergers and acquisitions lawyer, and high school Latin teacher.
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